I'm having flashbacks again. I made this argument prior to the PS2 launch. A single console is better for the user, full stop. As mentioned, you have 3rd party competition, which is better for us. Just look at trash like DOA that sells a bunch of copies b/c Team Ninja can flee to a system where they lack fighter competition. That certainly hasn't benefited the Xbox fighter fans. It also saves money on hardware, and you are guaranteed all games in a single place. This is largely why there is always a dominant leader. Hell, even the SNES held a strong marketshare while it was on sale. The Genny had a lead, and the SNES came up and snatched it. Hardware competition benefits hardware. That's it.
Right now, the PS3 and 360 are set in stone. Nothing will change for the duration of the generation. So I don't see how continued hardware competition benefits a damn thing. There will always be new challengers to the market, which is what keeps the hardware progression going. Nintendo is an anomaly that is getting serious competition primarily b/c they have been sluggish on the hardware front. If the PSP fell by the wayside, it would be b/c the consumer doesn't care about hardware, and just wants games. And all games will then consolidate on the DS, and it will end up being a better deal for the user. Right now, if you want GTA, you really have to go to the PSP (sorry, GTA is now a 3D franchise, DS fans). If you want Nintendogs *snicker* or Pokemon, you have to go to the DS. More hardware to buy puts a frowny face on.
I don't get this competition argument. What matters is games. What drives games competition is 3rd party competition, not MS vs. Sony. EA has managed to avoid this by buying up the competition, or just buying licenses. But if they were forced to compete with NFL2K or other football games, then we would see continued progression in the football genre. The one console future is the one console present and past. Soon there'll be a one handheld future as well, b/c it looks like Sony might have bought themselves at least another swing in the handheld market should this one fail. The situation in Japan isn't pretty, but they still aren't being blown out of the water...yet. The window there is closing fast, but as some here are saying, nothing is certain. The Saturn was ahead at one point too, but then the PS1 went on to punish it something fierce in Japan. The same could happen with key software releases and maybe an actually attractive price. I'm not saying it'll happen, and honestly don't expect it. But hey, if we can't discount the 360 challenging the PS3, I certainly don't think it's outlandish to think the PSP will challenge the DS/GBA2.
That said, there is really no hope in EU or JP for the competition. To say otherwise borders on being foolhardy. Even in the US, where it's believed MS has a realistic chance, it wasn't even close this gen. When you put it in perspective, Sony sold more units in Japan alone (the smallest territory) than MS sold worldwide. In the US, when the dust has finally settled, the PS2 may have well doubled the Xbox's global sales. Momentum, marketshare and mindshare are in their favor. The game is their's to lose. If that sounds fanboyish, so be it. PEACE.